Monday, July 16, 2012

The case was
booked into Court Two at the Central Criminal Court for at least eight weeks. This
was the second most important court in the country for criminal trials because
we needed the room for all the documents and exhibits which would be called in
the trial as evidence. I now had a little breathing space in order to try and
settle some of my outstanding work-load. I had other cases running at the same
time, and I was having to deal with the constant interventions from the
particular chief inspector who was determined to carry on with his overbearing
behaviour towards me.

At that
time, the culture at New Scotland Yard was hugely hierarchical, and officers
who were in the course of attaining senior rank were effectively untouchable.
The worst behaved like petty dictators, and they could damage a subordinate
officer's career on a mere whim. This particular officer had made it his
objective to punish me for the journey and the work I had undertaken in America
at my Commander's behest, but with the Commander now promoted and moved to
another department, this man went out of his way to belittle me, to rubbish my
work, and to insult me at every opportunity. He took the lengthy report I had
written on my work and findings in America, and in front of the rest of my
office, threw it across the room to lodge on top of a cabinet, saying it was
'shite' and proved the lack of wisdom in sending me to the States. He would call
me and my colleagues 'paper cowboys', meaning that we focused in minute detail
on documents and records (which was what you had to master in fraud investigation),
as opposed to the 'action culture' so beloved of officers from the old
hard-drinking, hard swearing departments such as the Flying Squad and the
Regional Crime Squads.

Lest it be
felt that I have been overly critical of departments and personalities outside
the police force, let me say here that one of the biggest stumbling blocks to
really effective detection and prevention of major fraud lay within the
policing agencies. The Fraud Squad possessed many officers who didn't want to
be there, who thought just like this particular man, who were incurably and
thoroughly lazy, and who did not have the intellectual capacity or the patience
to master the new dimensions of serious fraud that we were increasingly being
called upon to deal with. If anything contributed to the increased difficulties
in dealing with the new fraud paradigm, it was the existence of men like these,
and it was one of the bigger tragedies for me that no-one in a senior rank or
position could be bothered to realise it.

I have
already said that the real agenda behind the defence case preparation for the
trial had little to do with the solicitor concerned, but had everything to do
with seeking to find a way to get him acquitted of any offence of dishonesty,
so that the chances of civil suit against the law firm would be nullified. This
was the agenda that lay behind the High Court and Appeal Court actions to get
the documents from me, so that they could ascertain exactly the part the
solicitor had played. Then the demands for me to hand over all the evidence
against him were made so they could see exactly how strong my case against him was,
so that they could find ways to undermine it. His own attempts to make a self-serving
statement of facts had blown up in his face because I could prove he had lied. Everything
that could be done to get him out of the trial was attempted, and they had all
failed. They were faced with a huge bill for damages and the concomitant public
opprobrium that would go with the news of the trial and its outcome. I was very
confident that the evidence against him was overwhelming, and I was looking
forward to the trial.

The night
before the case was due to begin, I was in my usual state of excited
preparedness. I had gone over and over in my mind how I intended the case to
proceed, and what order I would recommend to counsel for the witnesses. There
was a knock at my front door. A local uniformed policeman was standing there
with a copy of an urgent telex from the administrator of the Central Criminal
Court. In the days without mobile phones or email, we had to carry important
messages by hand to their recipients.

The message
informed me that the case had been moved from Number Two court to a small court
at the Guildhall Justices' Rooms. I was dumbfounded. It meant that the case was
collapsing and the defendants intended to plead guilty, but why move it from a
very public court with its army of sharp-nosed court reporters, to a room in
the back of beyond behind Cannon Street Station, which even I did not know how
to find?

The next
morning, I turned up to the court with plenty of time to spare. I was met by
the Court Inspector from the Central Criminal Court, a kind and usually genial
man who knew most detectives who gave evidence at the Old Bailey by name.

He said; '...You're
not going to like what I am about to tell you, lad! I have a message from your Chief
Inspector that some kind of deal has been done between the prosecution and the
defence and guilty pleas are going to be entered today. Your boss says you will
not like what's going to happen and I am instructed that if you cut up rough
about it, which he strongly expects you to do, I will have to nick you and keep
you locked up till the court rises. I don't want to have to do that lad, so do
as you're told, duck your nut, no matter what happens, and we'll talk about it
afterwards...'

I thought the
ground was about to swallow me up, my head was whirling, what kind of deal
could they have done, and why had I not been consulted? I should have been the
first one to be asked if the deal was acceptable as I was the de facto
prosecutor, albeit we were led by a barrister. I tried to ring the office. The
Chief Inspector wasn't available, the bastard had decided to make himself
scarce. Then it hit me, he had been the one to order me to hand over all the evidence
to the defence, and now he had been the one to usurp my position and accept the
deal offered by the defence, and without telling me. None of my colleagues knew anything! '...What's
wrong...' they kept asking!

In court the
defendants were sitting at the rear of the court, with their solicitors. They
didn't look in my direction. The prosecution barrister was closeted with two
other briefs and didn't look like she was going to talk to me. I tried to make
eye contact with her. She looked away. I tried to engage her politely. '...I've
no time to talk to you now officer, perhaps later...' This was unheard of
behaviour, never before had I been through such a bizarre process, normally
your own prosecuting barrister wants to talk to the officer in the case at
length and alone to make sure everything is ready and available.

Suddenly, on
the dot of 10.30am the judge bustled in. Prosecution Counsel stood and asked
him if he had had a chance to read all the papers and submissions. '...Yes...'
he said, '...I have seen everything I need to see...' Prosecution counsel then
explained that of the sixteen or so charges on the indictment, starting with
the charge of conspiracy to defraud, followed by the long list of fraudulently
obtaining money by deception charges, she was advising the judge that the
prosecution would not be seeking to proceed with those counts and asked that
the judge allow them to lie on the file. The judge immediately agreed this was
the best course of action.

My head was
swimming, they weren't going to carry on with any of these charges, despite
everything we had been through, the civil cases, the demands for evidence, the
defendant's repeated lies which I had proved to be lies, he was going to be allowed
to walk away from every serious and important count on the indictment. More
importantly, these were all offences of dishonesty, so no conviction for
dishonesty would now appear on his record!

Prosecution
counsel then said that the defendants had agreed to plead guilty to the two
counts under the PFI Act, those of possessing and distributing unauthorised
leaflets. The judge then asked the clerk to read the two remaining counts, to
which the defendants both pleaded guilty.

These two
counts involved a dishonest element and as a result of their distributing the
documents, investors had been mislead and defrauded thereby. The solicitor's
barrister then stood and addressed the judge.

His client
had only agreed to plead guilty to these last two counts in order to save the
time of the Court, he said, all the other matters would have been strongly
contested but the prosecution's actions in not proceeding with them made the
whole issue now irrelevant. He then asked the judge to find that even in these
last two cases, that there had been no element of dishonesty involved.

I could not
believe my eyes or ears, he was asking the judge to connive in the acceptance
of what is called an 'equivocal' plea. When a defendant pleads guilty to a
charge he does so in the full admission of all the facts. If he says, '...well I
did the act but it wasn't dishonest...', then that is an equivocal plea and has
to be dealt with as a 'not guilty' plea, and a full trial ordered. Only a jury
can decide whether a defendant acted honestly or dishonestly. It is not part of
a Judges' function to so decide. However, this judge seemed oblivious to the
law, and he agreed that the record would note that no dishonesty was imputed.

Having
accepted these corrupt pleas, the prosecution counsel stood and asked if the
judge wished to be addressed on the defendant's antecedents. It is normal
practice when sentencing, for a judge to be informed of a defendant's
background and any criminal convictions he might have. In this case, the judge
demurred and said he knew everything he needed to know about the accused, and
did not need to be advised as to their antecedents, so the solicitor's previous
criminal history was not read to the court.

The
defendants were ordered to stand and the judge immediately gave them both
suspended prison sentences and ordered a small contribution for costs for their
legal aid! With that, he disappeared from the bench and left the Court. The
whole procedure had taken about ten minutes in all. no press were present or
available, so the matter was never reported.

I thought I
was going to be sick. After everything we had been through, this thoroughly
dishonest man had been allowed to walk away from the consequences of his
actions, because any other outcome would have meant a significant cost and
public disgrace for the law firm of which he was a partner. Any civil action
brought against him could now only be brought against him alone, and because
there were no findings of dishonesty, the cases would be much more difficult to
sustain. What is more, his partnership was safe, and their indemnity insurance
policy would not now be troubled. The legal establishment had conspired to
protect a City law firm at the expense of Justice, they had won and a man with
an habitual criminal record was being allowed to walk away free and clear.

The only
person who spoke to me was the metals' broker who came up to me and said; '...I
haven't a clue what went on there, I thought I was certain to go away...' I
managed to force something close to a smile. '...It was nothing you did...' I
said, '...just don't come back here again, you've had a great result...'

Our
barrister swept past me without speaking. There was no point in confronting
her, she was part and parcel of the same corrupt, rotten, system that had just
ensured that a law firm had survived, but in circumstances they did not
deserve.

I went and
sat in a pub and began to get very, very drunk. I had learned a series of very
painful lessons. I had learned that the City of London was a structure comprised
of a whole series of interlinking roles and movers, who were all bound up in
the same endgame. They all wanted to make money, and seemingly at any cost. I
thought about the spineless regulators in the DTI and how people like this
solicitor and his bent friends were so contemptuous of them that they thought
they could operate scams like the Vegas Trust with impunity. I thought about
the eminent silk who had advised them, his contempt for the DTI's regulatory
ability and his arrogance meant that he gave very poor advice to his clients.
He was amazed when I turned up to interview him and I cautioned him against
self incrimination. He took my advice and answered no questions. A little later
he would be elevated to an extremely important judicial role indeed. I thought
about the victims of the fraud, many of whom preferred to believe the word of
the solicitor when he told them their money was safe, rather than believe me
even when I showed them the evidence that their money had been frittered away. I
thought about how detectives within my own calling were letting the people of
London down by their arrogance, their ignorance and their obsession with
hierarchy and rank. I thought how wrongdoers were facilitated by London
lawyers, accountants, and the offshore facilities which can be arranged in a
few minutes with one telephone call, but which can take months if not years to
look behind the corporate veil. I realised then that we were just fooling
ourselves that we could make a difference, and that the City and the financial
sector were literally a 'protected species' and there was nothing I or mine
could do about it, and more importantly, if we tried too hard, we would be the
ones to be punished.

Later that
afternoon, the Court Inspector found me. '...Don't take it too hard lad, I've
seen many such cases in my time when the guilty are allowed to walk away
because the powerful are threatened. Just do your job to the best of your ability
and leave the outcomes to the people who run this bloody country, come on, time
to go home, you've had enough...'

Ironically,
the guilty solicitor was allowed to carry on practicing, albeit as a sole
trader. The Law Society did not apparently move against him in 1985, and
despite everything he was allowed to keep his practicing certificate. Imagine
my surprise therefore when researching this blog, I came across the following
entry in the Law Society's records.

"...The SDT ordered the respondent, (the solicitor in my
case) who had practised in a partnership, to be struck off the roll on 9 April
2002 for unbefitting conduct, in that he had acted in transactions relating to
banking instrument and investment schemes in which he had failed to comply with
assurances given to the Office for the Supervision of Solicitors (following a
warning letter sent to him) that he would not be involved in any further way
with such transactions; and in the course of those transactions he either had
failed to be alert or had deliberately closed his eyes to their suspicious
features and, in so doing, had acted in a manner likely to compromise or impair
his independence or integrity, the good repute of the profession, and/or his proper
standard of work, contrary to practice rule 1. The respondent was ordered to
pay costs (to be assessed)..."

I have no knowledge of this case, so I can not comment, I merely
insert it here for the record.

Since that day I have never believed one word that the City has to
say about its probity, its honesty or its sound advice. In my view it is a sink,
a cess pit, the words Mark Tucker, the
Deputy Governor of the Bank of England used recently when he referred to
Barclays Bank. That is why I say that the City is one huge criminogenic enterprise,
designed to exploit the gullibility of the public, and to protect the hegemony
of those who are permitted to practice within its gates. We should treat it as
an organised crime family and deal with it accordingly.

Sunday, July 15, 2012

I called the
metals broker and invited him to present himself at the Fraud Squad for
interview. He came in alone. I asked him if he wanted a solicitor present.
'...No...' he said, '...I just want to get this over with...' His story was
pathetic. He was a washed up metals trader who had never really made any big
money. At a time when it was almost impossible to work trading commodities and
not make a fortune, this marked him out as a real loser indeed. He had met the
Dutchman who offered him the role trading a metals fund, and offered him enough
money to pay his outstanding debts and try to save his marriage. He had jumped
at the chance. He knew it was illegal, and he thought all that screwing around
with the invitation document and the visits to the barrister were a waste of
time and money. '...I know enough about the PFI...' he said, '...to know what
we were doing was wrong, but when the brief said to give it a run anyway, I
thought hell, why not...'

I told him I
had uncovered the ruse with the trade statements, and he just hung his head.
'...To be honest...' he said, '...I didn't think that was wrong, it goes on all
the time in metals trading. You trade so many lots you often end up with an
exposed open position, so you put through a wash trade to cover your book...'

I pointed
out that this time, he had been misleading investors into believing a false set
of circumstances which was fraud, and he agreed this was very likely. '...I'm
really sorry...' he said '...I was desperate, how long will I get...? Then the
floodgates opened. '...I never made any money out of this, I only got a small
draw for salary. That bloody solicitor, he has enjoyed the money though on that
Amex card we got him, he loves that bloody piece of plastic...'

I said
nothing but made a calculated gamble. '...I am going to release you now on bail
to come back in 4 weeks time. When you come back bring a solicitor with you so
I can talk to him...'

When he had
gone I rang American Express Card Security. In those days most of the security
team were ex-Metropolitan Policemen, and we had an open liaison conduit to them
because we were always dealing with stolen and forged Amex cards.

'... Did
they have a card registered in the name of The Vegas Trust, or Baraquesa
Finance or even, I named the solicitor ...?'

'...Yes, an
Amex Gold Card, in the name of the solicitor and the name of his solicitor's
firm. Issued in Zurich, and paid for by cheques on an account in the name of
the Baraquesa Finance Corporation drawn on a Guernsey bank. The accounts were
sent to an address of an accountants' firm in St Peter Port. Paid regularly,
large sums, every month on the dot, cheques signed by the solicitor...'

'...Would it
be possible for me to have copies of the payment vouchers, the bills and the
cheques used to pay them...'

'...Of
course, we'll drop them round in a hour...'

When they
arrived, I looked through them. Wow, this man was using a lot of money to live
very high on the hog indeed. Expensive restaurants, antiques purchases,
theatres, designer clothes, and every bit of it completely invisible to any
routine enquiry. The card was administered in Switzerland, the bills sent to
the offices of an accountant in an offshore tax haven, who would always claim
client privilege, and paid for by this man flying once a month to Guernsey,
sending off a cheque back to Amex Zurich, having a very expensive seafood lunch
and then flying back to London. I could see all these transactions on the card
itself.

I was
elated, I had the evidence to put this corrupt bastard behind bars where he
thoroughly belonged. I rang him at his offices and asked him to come in to see
me. '...I am afraid that won't be possible...' he said, '...I cannot answer any
questions about the running of these companies as any information I possess is
completely covered by client privilege, you would be wasting your time trying
to talk to me...' I asked him a second time, and again he refused. The third
time I asked him he still refused, so I asked him to fax me a statement to that
effect. It dutifully arrived about 20
minutes later on his headed notepaper, saying he was unable to discuss any
matters because of client privilege. However, I had a minor victory, I had just
neatly finessed out of him a written admission that he was the solicitor to the
whole sorry mess.

With a
colleague, we drove over to his offices, where I arrested him in the front
lobby, making very sure that everyone there heard my words including my use of
the formal caution against self-incrimination. I asked him if he wanted someone
else to be present when I interviewed him and he nominated a young partner, who
came with us back to the Fraud Squad.

We used one
of the taped interview suites. I was a huge fan of taped interviews because
they saved so much hassle in court with barristers suggesting that certain
questions or certain answers had not been asked or given. He began very
pompously, making a statement that he was outraged to be arrested in his own
offices, and that he would be making a formal complaint about me to the Complaints
Bureau. He reasserted that he couldn't answer any questions about the business
as it was all covered by client privilege.

I wrote down
the address of the Complaints Bureau for him and then asked him a simple
question. '...How do you account for expenses in your general practice...?' He
made some bland statement. '...Do you use a credit card issued by your firm...'
'...No...' '...Have you ever been issued with a credit card by your firm...?'
'...No...' '...Then can you explain these...' and I dropped on the desk the
complete bundle of photocopied account statements, vouchers, and paid cheques.

There was a
terrible silence, and he went ashen. I thought he was going to pass out.
Looking at his partner, the man was sitting shell-shocked, and slowly put his
head in his hands.

I asked him
again to explain them.

'...How did
you get hold of these...you shouldn't be able to get these documents...' he
blurted out!

His partner
now urgently whispered in his ear, and then said '...I have advised my client
to say nothing more...'

That suited
me down to the ground. The tape when I replayed it was explosive. Any jury
being asked to listen to it would have no doubt of this man's complete guilt.

So, to
recap, I now had evidence that the whole case was a fraud from start to finish,
and that this corrupt man had benefited richly from the monies deposited by the
clients. I could prove conspiracy to defraud, any number of instances of
obtaining money by deception, to say nothing of the offences under the PFI Act.
I was home and dry!

Or so I
thought.

I was hoping
that when the solicitor was convicted of these frauds, his losing clients would
all be able to sue him for their losses, and the evidence of his conviction for
offences of dishonesty would make the civil actions a mere formality. He would
be bankrupted, which he thoroughly deserved. If he didn't have enough to pay
back the losses, then the losers would be able to sue his partners and the
practice, because being solicitors' partnerships meant that they were all jointly
and severally liable for losses incurred by the firm as a whole. So they would
have to invoke their liability insurance to pay the claims, which would prove
to be very expensive, and would cost each partner a lot of money.

I wasn't
about to lose a minute's sleep over this likelihood, as far as I was concerned
they had it coming, it was the moral price they had to pay for employing a
sleazebag like this arrogant man.

What I had
not fully appreciated was at the moment the solicitor left my office, his part
in the case became a complete irrelevancy. From that moment on, everything that
was about to fall on my head was all aimed at finding ways to protect the legal
partnership and prevent anyone from being able to sue them.

I was almost
immediately served with a writ demanding that all the documents seized by me
from the office search be returned to the company so that they could wind the
company up in an orderly manner. I refused to part with the documents because
they would have been used by other interested parties to begin to cobble
together a defence to the allegations about the trading methods. I realised,
no-one else knew what was in these papers so they needed to get them back.

At the
hearing in the High Court, the Judge agreed with our arguments and refused the
application. In panic, they then rushed off to the Court of Appeal and demanded
that we give them copies of the documents. I refused again for the same
reasons. However, the law as it then stood meant that I had to give them
copies. I was trying to buy enough time for the DPP to decide on the suitable
charges to bring against the solicitor and the trader, because after that they
would have been given copies of the documents anyway.

The Court of
Appeal, very grudgingly, found for the appellants, and agreed that copies should
be handed over, but deferred the date of delivery for a month, by which time
they opined, the DPP should have been able to decide on the relevant charges.
The judge giving the judgement said that they found that no criticism or blame
could or should attach to the detective in the case, or the Commissioner, which
was a blessed relief!

The next
move was that Sir David Napley, the country's leading criminal solicitor
demanded that I hand over all the evidence in my possession against the solicitor,
for whom he was now acting. I refused on the grounds that until the DPP made a
decision as to charges, he was not entitled to see the evidence. The DPP let me
know that they wouldn't force me to hand over the evidence, but this did not
stop Sir David from still lobbying them hard for me to give up all the evidence
against his client. He argued that it was no light decision to prosecute a
solicitor, and the evidence should be properly scrutinised before charges were
brought. This was an unheard-of move, it had never happened before in my
experience, and again I refused to give up the documents.

Almost
immediately, one of the chief Inspectors, my leading tormentor in the
Department ordered me to hand over the papers. When I argued that he had no
authority to order me to do something the DPP had said he would not force me to
do, I was told I would be suspended if I refused this order. Rather than face
the likelihood of suspension and having my case which was so close to being
finalised, taken off me and ruined, I handed over the evidence to Sir David.

Within a few
weeks, Napley's office sent back a statement, written by the solicitor in which
he purported to make a full explanation of how and why he had used the credit
card and stating that it was all done with the permission of his clients. It
was all complete rubbish, but it actually played into my hands because I was
able to prove that he had lied in his own voluntary statement, which subsequently
turned it into a toxic weapon against him.

In the end, the
solicitor and the metals broker were eventually charged with a large number of
charges starting with conspiracy to defraud, followed by a long list of charges
of obtaining property by deception, and finishing up with two charges of
possessing and issuing documents contrary to the terms of the PFI Act. After a
lengthy committal case, he and the broker were committed to stand trial at the Central Criminal Court on a lengthy
indictment. Ironically, while the solicitor was being charged, a routine Criminal
Records check proved that he already had a string of previous convictions for
offences which should have been disclosed to the Law Society's Disciplinary
Body, but for which he had used an alternative combination of his names, and of
which they had no knowledge.

So, by this
time, I had learned that the derivatives trading business was an utterly
corrupt market, run by and in the interests of the few, and that documents
required for accounting purposes were routinely made up to cover embarrassing
situations. I had also learned that the law will be twisted and that solicitors
will use every dirty trick they can find in order to protect their clients when
they face serious fraud charges. I had learned, that civil court cases will be
used to occupy the time of investigating detectives, bringing huge pressure on
them, when they should be focusing on getting evidence to prove a criminal case
properly, and that both barristers and solicitors were happy to take these
instructions even though the highest degree of likelihood existed that they
were being paid with money unlawfully acquired from innocent investors.

Nevertheless,
I had won through despite everything, bent solicitors, incompetent and arrogant
and overbearing senior police officers, pompous, bullying defence lawyers, I
had survived and my case had got to trial at the Central Criminal Court. Now
there would be no turning back, and I was very confident that we would win, and
win hard! I thought that nothing else could go wrong, but even worse was to
come, an event which completely dumbfounded me then, still confounds me now,
and destroyed any sense I might have had of the honesty of the English Judicial
system, and how it will be abused when persons from the upper socio-economic
group are involved.

Back in the
office, I started to unravel the mess that was The Vegas Trust. The first thing
I did was to get statements from the two City Bankers who had brought the
matter to the attention of the DTI in the first place, as I believed their
evidence would be vital to proving the case, and would be very persuasive to a
Jury.

Let me say
that both men were utterly charming, and allowed me to visit them. However,
neither man was keen to make a statement and it was very clear that neither of
them wanted, under any circumstances, to be called to give evidence in Court.
Both insisted that if necessary, they would require a witness order to be
issued by a Judge to enforce their attendance!

They were
content to say that the document was utterly reprehensible and in their view a
complete breach of the PFI Act, but when it came to wanting to be involved
personally, they were very reluctant.

One of them
greeted me when I walked in to his office. He came over and shook my hand. He
did so in a very peculiar way, his thumb pressing between my knuckles and
rotating hard. I shook his hand as best I could in return. He started to walk
back to his desk then turned around and said 'Let me check that handshake
again'! He held out his hand and I took it. He then proceeded to press another
set of knuckles, while pressing hard with his thumb between the web of my thumb
and first digit, while I simply tried to give him my usual firm grip handshake.
He seemed satisfied and returned to his desk.

He insisted
on having his original statement looked at by his lawyers before he would sign
it, which took time, but eventually he did send it back, with a covering letter
explaining how busy he was, and that he only expected to be called to give
evidence if it was absolutely vital to the case.

I was very
intrigued by the handshake episodes, and having been a Scotland Yard detective
for some years I was not unaware of the influence of Freemasonry within both the
City and the Force. I am not and never have been a Freemason, believing their
practices to be incompatible with dedicated police work. However, some of my
friends did practice the craft, and I asked one of them who was open about his
interests to explain the significance of the handshakes.

His answer
was fascinating. '...First of all...', he said, '...he would have almost
certainly expected you to have been a City Police detective, not a Met officer.
He wanted to see if you were a Freemason and what rank you held. You would have
conveyed this in your first handshake with him. His handshake was intended to
tell you that he was of very senior rank indeed in the Order. You must have
inadvertently given him the impression that you were on the Square as well, but
as you are not, he would have been confused as to your standing so he came back
a second time. In his second handshake (which I had described) he was telling you
that he was in distress, meaning he was indicating that he did not want to be
put in an embarrassing position, and if you had been a Mason, you would have
understood this...'

I was
learning that Freemasonry played a significant part in the way in which the
financial sector was run! These important men were prepared to complain about
others from behind cover, but they didn't want to stand up and be counted when
the chips were down. They had power, no doubt of it, but without
responsibility, the prerogative of the whore, and they used their undoubted
power in the City to get out of difficult situations when it didn't suit them
to come to notice. I would later learn that in the City it is not the done
thing to be a whistle-blower, no matter how elevated your position or how great
your power. The financial sector frowns on those who tell tales outside the
magic circle. No wonder they didn't want to come to give evidence.

More importantly,
I had discovered something momentous in the Vegas Trust papers. The first six
month audit had been given and signed off by a leading firm of accountants.
They had simply taken all the trading statements provided by the firm, checked
them to see that the figures on the documents tallied with the accounts of the
Vegas Trust, and signed them off as being accurate and truthful. This audit report
had been sent to all the clients of the Trust. This was going to make things
very difficult for my investigation.

The
investments from the clients had been paid into a bank account in Guernsey.
Monies from that account to fund the trading operation were ostensibly drawn
down and used to pay the margin deposits with the various broking arms of the
brokerages used by the metals broker (who had been appointed as a manager to
the Trust through a company trading in the Turks and Caicos Islands). All client
money balances were held in an account in Guernsey, and they were administered
by a Guernsey Accountant.

The
documents disclosed that the Trust was showing a profit in the first six months
from trading Silver in its books in excess of £150,000. My first thought was
that the trader might have just forged the trade statements like Michael
Doxford had done. No, the account statements were all provided by a well-known
and distinguished old London-based, commodities trading broker house, and they
were patently not forgeries.

I was
aghast! I had just turned over a company that despite its breaches of the PFI
Act, was clearly trading at a significant profit, and that money was now out of
reach of the creditors and I was being blamed for causing the company to fail.
The company had issued press releases stating that despite being a profitable
concern, (please read our accountant's
audit report), the highly improper and precipitate actions of the police had
created an atmosphere of distrust in which the company could not trade
successfully any more, and would need to be wound up. It was unlikely that any
monies would be realisable at the end.

I had
started to receive letters before action from angry clients threatening the
Commissioner of the Metropolitan Police and myself with writs for damages for
destroying their investment opportunities. I had senior officers crawling all
over me like a rash, demanding that I account for my actions and suggesting
that the case be taken from me and closed down and settlements agreed with the
losers. Two middle management officers who particularly disliked me were
vociferous in their condemnation.

They
resented me because my Commander had earlier sent me on an extended study visit
to the USA where I had studied financial crime and financial regulation with
the SEC, the CFTC in Washington, and all the major trading exchanges in
Chicago, Philadelphia and New York. These men had lobbied long and hard to be
allowed to accompany me on this visit, not because they knew anything about
financial crime (they didn't), and not because they were going to stay at the
Fraud Squad (they weren't), but because they fancied an extended trip to the
States courtesy of the British taxpayer, using the excuse of being there to
'supervise' me. My Commander had put them firmly in their place and indicated
that it was his decision that I would go alone and report back. This decision
caused an enormous amount of resentment among a group of men who were steeped
in the theory of hierarchy, and thought that I was being given privileges above
my rank. On my return they made it their business to make my life a misery, and
this case was a good opportunity for them to turn the knife.

I simply
could not believe that the Trust had made this money lawfully. I had analysed
their earlier trading and almost without exception, they had made consistent
losses. Frankly, the metals' trader wasn't at all good at his job, he was
nothing more than a bad gambler, and he got things consistently wrong. But hey
presto, just as the audit date was about to arrive, he engaged in a spectacular
trade which made a huge profit.

The whole
case now hung on evaluating this one trade. If he was right, then I and my
Fraud Squad career were probably finished. If he was wrong, then the case was a
wide open fraud, and everything would go well after that! Or so I thought!

The trade
was a short sale of silver, buying at a specific price, waiting for the price
to fall, and then closing the contract at an even lower price, but making a
profit on the differential. The trade statement showed the contract being
opened on 1st November selling a significant number of lots of silver at a price
of £234 a lot. The closing trade statement showed the contract being closed out
on 15th November at a closing price of £210 a lot, a profit of £24 per lot. The
number of lots involved meant that the total profits from this one deal were sufficient
to wipe out the accrued debts from previous losses, and leave a balance, after
commissions of in excess of £150,000.

My cop's
instincts told me this was hooky, it just screamed 'Fraud' at the top of its
voice and my detective's gut reactions were to continue to follow the evidence
wherever it led. I had always been a huge fan of Sherlock Holmes, and Conan
Doyle's brilliant creation was often a source of solace and instruction for me.
I often quoted him to myself; '... It is a capital mistake to theorize before you have all
the evidence. It biases the judgment...' or '...It is
easier to know it than to explain why I know it...' and even '...In
solving a problem of this sort, the grand thing is to be able to reason
backward. There are fifty who can reason
synthetically for one who can reason analytically...' But I particularly relied upon Holmes's most famous
adage, '...How
often have I said to you that when you have eliminated the impossible, whatever
remains, however improbable, must be the truth..?'

I rang the brokers and asked them if the first trade with its
reference number had been undertaken by them and on their book. 'Yes' was the
reply, 'we did this trade on the day in question.' I then asked if they had
undertaken the other trade referred to on its specific date. 'Yes' came back
the answer, 'they had done that trade also on the date referred to.'

Fuck! I put the phone down, I knew when I was beaten. It was only
a question now of trying to save face and get us out of this mess with the
least cost to the Commissioner and try and work out how I was looking forward
to being a school crossing patrol constable in South Mimms for the rest of my
career.

And then, a simple but highly unlikely thought struck me, as yet
another of Holmes's philosophies came through to me. Here I was thinking about
the imponderable and I still hadn't finished the main enquiry. Holmes once said
'... Before turning to those
moral and mental aspects of the matter which present the greatest difficulties,
let the inquirer begin by mastering more elementary problems...'

I rang the brokers once more, was
there just a chance? I could tell the guy at the brokerage was getting fed up
with my calls.

'...Are these two trades directly
related..?' I asked him, '...does the opening statement refer to a deal done
which was closed by the second trade...?

'...I'll check...'

He was back on the phone. 'No,
there is no connection between them. The first short position is the closing
trade of an earlier long position on which they lost a lot of money. The second
long closing position is the first of
two undertaken in a wash trade...' They just spent a lot of money on commission
for nothing. By the way we have closed their account and issued a statutory
demand for payment, they owe us a lot of outstanding money...'

(A wash trade is where a trade is
opened and closed for the same price in the same transaction. It is a
purposeless transaction but it exists to provide necessary documentation when a
broker needs a convenient trade statement to close an open position. Its legality
is dubious but was quite openly used in those days.) What the Vegas Trust had
done was to use the back end of the first trade and the front end of the latter
wash trade. Then discard the first and last documents and back the second and
third documents together and call them a profit. As long as nobody asked any
awkward questions, no-one would be any the wiser.

I sat back as an indescribable wave
of relief flowed through me. The whole thing was a complete fraud. It wasn't
just a case of some dodgy documents, the whole bloody shambles was a fraud from
start to finish. They hadn't even paid their brokers, they were so greedy. My
first concern was for the money in the accounts. The problem was, they were in
Guernsey, and I had no powers there! I rang a colleague (and a mate) in the
Guernsey Fraud Squad

'It was more than his job was
worth' to ask questions about a bank account he told me!' '... I will do what I
can...'

He was back on the line, the
accounts were empty and had been for some days, ever since the search of the
premises.

But now, my enquiry was wide open
and I could do what I wanted without hindrance. I was dealing with a major
fraud case, the documents proved the whole operation to be a series of lies,
the audit was hugely negligent because the accountants hadn't reconciled the
bank accounts with the documents, but they simply wanted a quick fee for 5
minutes work, and hadn't asked the right questions. More importantly, these
so-called forensic experts had no experience or gut reactions to recognise a
fraud when it was in front of them. I was ecstatic, but my joy was to be
short-lived.

I had learned that even the most
elevated people in the City would prefer to play by their own rules rather than
engage with the ordinary rules of social responsibility that apply to the rest
of us. They considered themselves to be a class apart, and saw no reason why
they should be required to conform. They knew the DTI Secretary of State
personally, they met him at high City functions, and they were just passing on
some information on an informal basis. They never ever expected to be required
to step forward and become accountable. I began to learn that this attitude
applied to everything that they engaged in. I was learning that the City had
its own ways of doing things and the City did not believe that it was anybody's
business but their own how they behaved.

I also learned that accountants
will do anything for money. The old joke is true! What happens when you ask an
accountant what two and two makes? His answer will be 'What do you want it to
make?'

But then my problems really
started, which I will deal with in the next posting.

Saturday, July 14, 2012

Unless you
have been completely out of reach of any form of media source in the last week
or so, you cannot have helped learning of the growing scandal which is
engulfing Barclays Bank for their part in the manipulating of LIBOR.

Even so, you
might be still asking yourself why I have used the title above for this piece.

It is my
contention that Barclays Bank has become a serial criminal enterprise, and it
most closely resembles an organised crime group. I have used this phrase
before, but now I am going to back it with evidence.

In January 2011, The Financial
Services Authority (FSA) fined Barclays Bank (Barclays) £7.7 million for
failures in relation to the sale of two funds. Barclays were ordered to contact
customers and pay redress where appropriate.

Between July 2006 and November
2008 Barclays sold Aviva’s Global Balanced Income Fund (the Balanced Fund) and
Global Cautious Income Fund (the Cautious Fund) to 12,331 people with
investments totalling £692 million.

However, there were a number of
serious failings in the way the funds were sold. These include:

·Failing
to ensure the funds were suitable for customers in view of their investment
objectives, financial circumstances, investment knowledge and experience;

·Failing
to ensure that training given to sales staff adequately explained the risks
associated with the funds;

·Failing
to ensure product brochures and other documents given to customers clearly
explained the risks involved and could not mislead customers; and

·Failing
to have adequate procedures for monitoring sales processes and responding
promptly when issues were identified.

The FSA’s investigation
revealed that even though Barclays had itself identified potentially unsuitable
sales as early as June 2008, it did not take appropriate and timely action.

In fact, of the 12,000 or so
investors, most of whom were retired or nearing retirement, 1,730 complained
about the advice they were given to invest in the funds. This equated to
approximately one in seven investors.

As a result Barclays had
already paid approximately £17 million in compensation and the FSA estimated up
to £42 million further could be paid to customers who received unsuitable
advice.

“The FSA requires firms to have
robust procedures in place to ensure any advice given to customers is suitable.
Therefore, when recommending investment products, firms should take account of
a customer’s financial circumstances, their attitude to risk and what they hope
to achieve by investing.

“On this occasion however,
Barclays failed to do this and thousands of investors, many of whom were
seeking to invest their retirement savings, suffered. To compound matters,
Barclays failed to take effective action when it detected the failings at an
early stage.

“Because of this, and given
Barclays’ position as one of the UK’s major retail banks, we view these
breaches as particularly serious and fully deserving of what is a very
substantial fine.”

Let us be absolutely clear,
where a person solicits an investment in a product but fails to give the
correct information to the person being solicited, whereby the investor makes
an investment he or she would not otherwise have made, based on the misleading
information, that is the criminal offence of fraud. Every single one of these
misleading sales was a fraud, and Barclays
personnel involved in this scandal should have been prosecuted for fraud.

This
is a reason why Barclays have paid back significant losses caused to their
clients by the mis-selling of PPI policies. In addition they have been the
subject of regulatory investigations over the way they mis-sold interest-rate
swap derivatives. The phrase mis-selling is merely a politically correct form
of words which in any other walk of life would be called 'fraud'!

Again in January 2011 The Financial Services Authority (FSA) fined Barclays
Capital Securities Ltd (Barclays Capital) £1.12 million for failing to protect
and segregate on an intra-day basis client money held in sterling money market
deposits.

Under the FSA’s
client money rules, firms are required to keep client money separate from the
firm's money in segregated accounts with trust status. This helps to
safeguard and ring-fence the client money in the event of the firm's insolvency.

For over eight
years, between 1 December 2001 and 29 December 2009, Barclays Capital failed to
segregate client money maturing from its sterling money market deposits on an
intra-day basis. Such client monies were segregated overnight but matured
into a proprietary bank account and were mixed on a daily basis with Barclays
Capital’s own funds, typically for between five and seven hours within each
trading day.

The average daily
amount of client money which was not segregated increased from £6 million in 2002
to £387 million in 2009. The highest amount held in the account and at risk at
any one time was £752 million. Had the firm become insolvent within the five to
seven hours each day in which the funds were unsegregated, this client money
would have been at risk of loss.

Funnily enough, the man in charge of Barclays Capital at this time was
Bob Diamond. It might be argued that such activity was not criminal per se, but
one of the purposes of the client money rules is to ensure that banks protect
their client's monies, and by failing to do this, Barclays were dealing with
the money as if they were the owners and outside the lawful remit of their
powers.

In August 2010, Barclays was forced to pay
$298m (£190m) in fines to the US authorities for "knowingly and
willfully" violating international sanctions by handling hundreds of
millions of dollars in clandestine transactions with banks in Cuba, Iran,
Libya, Sudan and Burma.

The bank agreed to pay financial penalties
to settle two criminal charges laid by the US department of justice, which
accused Barclays of violating a "trading with the enemy" act which
prohibits business with certain countries viewed as threats to national
security.

Documents filed at a federal court in
Washington accused Barclays of handling money transfers totalling $500m from
banks in prohibited countries through its dollar clearance branch in New York
between 1995 and 2006. Barclays is not alone in facing such charges: Lloyds TSB
and Credit Suisse both settled with the US government last year over similar
dealings with institutions in repressive regimes.

"For more than a decade, Barclays
knowingly and wilfully engaged in practices outside the US that caused its New
York branch and other financial institutions located in the US to process payments
in violation of US sanctions," said an affidavit filed by the US
government, which described Barclays as a London-based institution employing
144,000 people in 50 countries with 48m customers.

Under a deferred prosecution agreement
signed by Barclays' general counsel, Mark Harding, the bank had agreed to a
string of measures to improve training and tighten internal procedures, and to
co-operate with any further investigation by the US authorities. The bank paid
$149m to the US department of justice and a further $149m to the office of New
York's district attorney.

The deal went before a Washington judge for
approval. But judge Emmet Sullivan adjourned the hearing, saying he wanted
Harding to appear in person: "He's the one who signed the pleadings and he
should be here."

The US government has vowed to come down
hard on sanctions-busting. Cuba has been barred from business with the US since
President Kennedy's tenure in the White House in the early 1960s. Sanctions
have been in place against Iran since 1995 and were imposed on Sudan and Burma
in 1997. Libya was on a list of "state sponsors of terrorism" until
2006, although relations have since thawed.

Prosecutors contend that foreign banks with
a presence in the US have colluded in giving institutions in these repressive
regimes a back-door route into the American financial system. Lloyds TSB agreed
to pay $350m in January 2009 for its dealings with Libya, Sudan and Iran, while
Switzerland's second biggest bank, Credit Suisse, struck a deal in December paying
$536m for violating sanctions against Iran.

Finally in recent days, Barclays has been fined £290m ($450m) for trying to
manipulate a key bank interest rate which influences the cost of loans and
mortgages.

Its traders lied to make the bank look more
secure during the financial crisis and, sometimes - working with traders at
other banks - to make a profit. Barclays said the actions "fell well short
of standards".

Barclays' misconduct related to the daily setting
of the London Interbank Offered Rate (Libor) and the Euro Interbank Offered
Rate (Euribor).

These are two of the most important interest
rates in the global financial markets and directly influence the value of
trillions of dollars of financial deals between banks and other institutions.
They can also affect lending rates to the public, for instance, with some
mortgage deals.

Between 2005 and 2008, the Barclays staff who
submitted estimates of their own interbank lending rates were frequently
lobbied by its derivatives traders to put in figures which would benefit their
trading positions, in order to produce a profit for the bank.

And between 2007 and 2009, during the height of
the banking crisis, the staff put in artificially low figures, to avoid the
suspicion that Barclays was under financial stress and thus having to borrow at
noticeably higher rates than its competitors.

The FSA pointed out that Barclays traders were
quite open in their routine attempts to lobby their colleagues who submitted
the bank's estimate of its borrowing costs to the BBA. It was particularly
concerned because it appeared to be "accepted culture" amongst some
staff.

Both UK and US authorities were also critical of
Barclays' lack of internal controls over its system of submitting information
on Libor and Euribor. This, along with inadequate supervision of trading desks,
"allowed this conduct to occur", US regulators said.

Barclays' record
fine for rigging Libor interest rates should be a "watershed" moment
for the wider financial industry to clean up its act and restore public trust,
The FSA said . The Libor penalty and last week's news that Britain's top four
banks mis-sold interest rate swaps to small businesses compounds the stereotype
of a sector that cannot be trusted and left to its own devices, said Tracey
McDermott, acting head of enforcement at the Financial Services Authority.

"Instead, it
sells products to the wrong people at the wrong time in the wrong way. To
change things in the future, to restore that trust and confidence... requires
tough action from the regulator but it's not our job alone," McDermott
told an FSA conference.

"Perhaps the
reaction to the penalty imposed last week on Barclays will be a watershed moment,
the point when the industry realizes that it also has to rise to the challenge
and to recognize that things have to change," she said.

McDermott said
"wave after wave of mis-selling scandals" meant the role of
regulators must be rethought and warned firms which fail to improve despite
repeated requests.

"We need to
have a low tolerance for firms that constantly bump along the bottom. We will
be much more prepared to intervene and limit business," McDermott said.

All these examples
demonstrate that there is an ingrained culture in Barclays Bank to ignore the
law, both civil and criminal, where it doesn't suit Barclays' ambitions or
agenda. These examples are evidence of a wholesale culture of criminogenisis,
or a potential to engage in criminal conduct. It has gone on for so long that
many Barclays' employees are simply unaware when they are doing right and when
they are doing wrong. They have developed their careers in an institutionalised
atmosphere of 'anomie', or a state of avoidance of all conventional norms of
honest conduct.

It is too late now
to reverse this trend because it is too entrenched. The only way that this
pariah bank can be turned round is for a series of targeted prosecutions to be
brought against some of the more elevated serial offenders, and harsh penalties
imposed upon conviction.

A new board must be
employed, and the existing members dismissed without compensation. They have
presided over this culture of condoned criminality for too long, and it would
be a travesty of justice if they were allowed to remain in post, picking up
their inflated compensation.

The new board must
start by requiring all employees to re-apply for their own jobs, so that the
more egregious and recalcitrant offenders can be rooted out. A full programme
of ethical reconstruction must be applied, and not one provided by the usual
suspects in the big consulting firms

The retail and the
casino arms of the bank must be rigidly segregated. Then, and only then can
Barclays be permitted to continue doing any financial business again. The only
alternative is to close it down by removing its banking licences, on the
grounds that it is too dishonest to be allowed to continue in business. We must
be prepared to confront the full implications of such an event, but banks can
no longer be permitted to believe that they are a protected species, and too
big to fail. When the Government is willing and ready to show that no financial
institution is above the law, we will begin to see the much desired sea-change
in attitudes towards banking that this country so badly needs.

Friday, July 13, 2012

In the 1980s
under Margaret Thatcher's attempts to open up the London market to the
beneficial influence of international capital flows, London became the fraud
capital of Europe. Every dodgy con-man, snake-oil salesman, share pusher, bunko
merchant, Ponzi scheme promoter, and even US mafia-connected securities
dealers, boiler room operators and 'paper hangers' flooded into London to take
advantage of the big financial free-for-all that Mrs Thatcher's philosophies
regarding free markets would unleash.

The Vegas
Trust case for me probably encapsulated everything that was wrong with the
entire financial sector and those who regulated it, operated it, legally
advised it, judged it, and yes, who policed it, sadly.

It involved
straightforward criminals, dubious investment promoters, bent solicitors,
amoral barristers, pathetic DTI officials, cowardly senior City bankers, a
bunch of terrified solicitors in a City law firm, some arrogant and incompetent
middle-ranking police officers, off-shore companies and trusts, and one of the
biggest perversions of the course of English justice that I had ever personally
witnessed. After the Vegas Trust case, I no longer believed that literally anything
was sacrosanct, and that everything could be bought and sold, including the
highest levels of the English legal and judicial system.

The case
involved a dodgy Dutch 'investment promoter', a British metals broker and a
bent solicitor. They came up with a scheme to solicit investments from public
investors in a pooled commodity futures trust fund, which they christened 'The
Vegas Trust' and which they would ostensibly trade and make a profit, which
they would then distribute among the investors.

Where was
the harm in that you might well ask?

Well, under
the law as it then stood, The Prevention of Fraud (Investments) Act 1958, (PFI)
prohibited such investment schemes, on the grounds that they were simply too
risky for ordinary investors to understand and appreciate the risks involved, so
they were outlawed.

The law also
outlawed the possession or the circulation of any document soliciting any such
investment, the view being that if the existence and possession of such
documents were prohibited, then they couldn't be sent to unwary investors.

It is one
the biggest ironies to me that in its time, the PFI Act was roundly denounced
at the time of the introduction of the Financial Services Act, but with the
benefit of a lot of very cynical hindsight, I now realise that it was a really
rather sensible and simple law, and should have been left well alone.

The law did
permit the sending of such circulars to certain legally-defined professional
investment advisers, under the proviso that the person doing the sending would
themselves be authorised to deal in securities by their possession of a licence
granted by the DTI.

In or about
late 1983, what this bunch of adventurers decided to do was to create a
document which they hoped would somehow allow them to get their investment
proposals out into the public domain, but appearing all the while to possess a
spurious claim to be complying with the law. It was a transparent attempt to
circumvent the criminal law, it was deliberate, it was blatant, it was
dishonest, and it was typical of the kind of investment scam of which so many
were then proliferating in London.

The metals
broker, was really a patsy in this fraud, albeit he knew exactly what was
intended to happen and what was going to go on. The real fingers in the pie were
the Dutchman and his close friend the solicitor, a flamboyant man who was a partner in a City law firm in Fleet Street.
It was he who organised and set up the relevant off-shore constructions
designed to give the scheme an air of sophistication, while crucially assisting
in providing a major barrier to any meaningful investigations that might take
place. The money would be held in a Trust called the Vegas Trust, whose head
offices were claimed to be in Panama, although it was really registered in Guernsey,
one of the many off-shore tax havens which sheltered a wide variety of dodgy
investment promoters in those days. The company created to administer the
affairs of the Trust was named the Baraquesa Finance Corporation, and
registered in Panama.

It was the solicitor who brought in a seedy former fund manager to be the Managing Director
of the Baraquesa Finance Corporation, and who also introduced a near bankrupt
Peer of the Realm as Chairman. The intention was to pay this hapless man a fee
of £60,000 per annum for the use of his name and title, a sum which he was
pathetically grateful to accept.

Together,
these characters drew up a circular which contained the usual inflated puffery
and investment blurb, and stating that the Trust funds would be audited every 6
months by a leading City accounting firm, just to give an added air of
authenticity.

The plan
then was to seal the document inside a plain brown envelope, with the following
words printed in red on the front;

"...WARNING -
Opening this envelope could be a criminal offence if you are not authorised to
do so. Please pass this envelope unopened to your professional adviser..."

This envelope was then placed inside a second larger
envelope which was then addressed to a list of names they had acquired from a
City listing service of City Liverymen.

Before sending off these letters however, the solicitor sought advice from Leading Counsel as to the legitimacy of such an action. This
was an extremely clever move and it nearly had the desired effect, and had the
letter not landed on the doormats of certain august City figures, it might have
succeeded.

He chose a very eminent and senior commercial silk
who would later go on to achieve highly elevated status indeed in the English
legal firmament. They made an early appointment with this man at his chambers
in the Temple and they took the letters down to show hm.

What follows was admitted to me by the Metals Broker
when he was later arrested. He stated that the eminent barrister made the
following observations. When asked to opine on the legality or otherwise of the
proposed letters he said;

"...The law in this regard is a grey area. While what
you propose may indeed be in breach of the Act, the chances of the DTI doing
anything about it, even if they were to find out about it, is highly unlikely. If
I were you, I would give it a try and see how you get on...’

I will return to this point later.

The letters were posted, and I want you to imagine the
scenario. A City liveryman, who could have been and often was a non-City practitioner,
being doctors, academics, accountants and other assorted members of the Great
and the Good, is having breakfast. The letter lands on his mat. He opens it,
only to be confronted with the proviso not to open the letter. I can imagine
that hundreds of men nearly burst a blood vessel tearing open the second
envelope to read its contents, and it had the desired effect, because a lot of
people did send in money to open an account in this entirely illegal
enterprise.

Unfortunately for the Vegas Trust promoters, two of
the letters landed on the mats of very senior City bankers indeed, the then Chairman of Kleinwort Benson Ltd,
and the Director General of the Council for the Securities Industry, who
immediately complained to Cecil Parkinson, the then Minister at the DTI about
the marketing practices of ‘The Vegas Trust', as being the very kind of dodgy
scams the City was trying to stamp out! The letters were
immediately passed to the DTI Investigations Branch for action.

The DTI Officials were perturbed by this document.
They couldn't do what they would have done in most cases, and quietly ignored
it, hoping it would quietly fail after a few months and after a few stupid
punters had been fleeced. This had been referred to them by their own Secretary
of State who was demanding action.

On the other hand, this case contained certain
dangerous ramifications, because it looked like the villains had come up with a
rather novel wheeze, and there was significant unwillingness to take on the
investigation for fear that a prosecution might possibly fail, which would
adversely influence the promotion prospects of the officer recommending the
prosecutorial course of action! In the file which I was later allowed to
inspect, the following comment appeared.

"...‘While the persons involved are obviously in breach of the
PFI Act 1958, it is clear that they have identified a novel way of offending
against the Act. If a prosecution was brought which was subsequently
unsuccessful, the officer concerned could be deemed to have made an error of
judgment which might adversely affect their future career...

Let us therefore pass this matter to the police for
further action. If they are successful, this Department will be deemed to have
made a successful judgment. If they are unsuccessful, any criticism will attach
to their handling of the case, and will not impact upon this
Department..."

So the ever-vigilant heroic regulators of the DTI came
up with their own clever scheme. They would pass the papers to the Fraud Squad
to investigate. In their covering referral letter, they used the excuse that
'...‘....however, though Vegas’s head office
is, according to its literature, in Panama, it is not a company registered there.
Without proof of incorporation the Department cannot exercise its investigatory
powers...and your assistance is sought...’

It took me one visit to the offices of the Vegas Trust
to ascertain that the Trust was registered in Guernsey, so well within the
investigatory remit of the DTI. How did I know? It was written in gold on the
window of the offices! However, the DTI regulators were not well known for
getting out of their offices to conduct such complex investigations, so the
case was now firmly in the hands of the Fraud Squad.

Search warrants were sought and executed, and all the
company's papers and documents taken back to the Fraud Squad. The Dutchman went
on the run to Holland and never returned. The solicitor wrote to all the
investors informing them that the precipitate actions of the police meant that
the company had to cease trading and all their investments should now be
considered as lost. Threats of writs for damages were received by me at the
Yard, and I began to investigate the dealings of the Vegas Trust.

The case had already acquired the status of what our
US detective colleagues would have called 'High JIngo', which meant that from
now on, it was going to have dirty politics written all over it!

I had
already learned that a corrupt solicitor can cause difficulties out of all
proportion for investigations of fraud cases. I had experienced at first hand
the brick wall thrown up by the use of offshore tax havens to criminal
investigators. I had witnessed, yet again, the spinelessness of the regulators
in the DTI, and I had seen how a commercial barrister would be willing to give
any legal advice which his client wanted to hear, for a fat fee, naturally.
Above all, I was beginning to learn that London, as a financial centre, was
wide open for every kind of fraud going, and that all the different branches of
the professional services providers were perfectly happy to play their part in
a thoroughly dishonest enterprise, just by turning a blind eye to the possible
consequences of their actions.

In the next posting I shall deal with the
investigation and its impacts.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!